CERSAI Registration Sufficient to Claim Secured Creditor Status, Rules NCLAT

The Delhi Bench of the National Company Law Appellate Tribunal (NCLAT) has ruled that CERSAI registration is sufficient for a creditor to claim secured status under the Insolvency and Bankruptcy Code (IBC). The tribunal clarified that non-registration with the Registrar of Companies (RoC) does not invalidate the secured creditor status, provided the charge is registered with CERSAI (Central Registry of Securitisation Asset Reconstruction and Security Interest of India).

This landmark decision came in the case of Bizloan Private Limited vs. Autocop (India) Private Limited, where the NCLAT overruled the previous order of the National Company Law Tribunal (NCLT), Mumbai, which had treated Bizloan as an unsecured creditor.

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Background of the Case

• Parties Involved:
  • Appellant: Bizloan Private Limited, a financial creditor.
  • Corporate Debtor: Autocop (India) Private Limited.
• Credit Facility:
  Bizloan had extended credit facilities worth ₹1 crore in the form of Sales Bill Discounting (SBD) and Purchase Bill Discounting (PBD) to Autocop.
• Initiation of CIRP:
  The Corporate Insolvency Resolution Process (CIRP) was initiated against the corporate debtor by the adjudicating authority.
  On April 4, 2022, Bizloan submitted its claims in Form C with the Interim Resolution Professional (IRP).
• Dispute:
  In December 2022, Bizloan discovered that it was classified as an unsecured creditor in the final resolution plan, despite having a registered charge with CERSAI.
  The company filed an IA (Interlocutory Application) challenging this classification. However, by the time the matter was heard, the corporate debtor had already entered liquidation on May 19, 2023.

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Appellant’s Argument

Bizloan argued that:

1. CERSAI registration of its security interest was sufficient to establish its status as a secured financial creditor.
2. The Adjudicating Authority failed to properly interpret Section 52(3) of the IBC, read with Regulation 21 of the IBBI (Liquidation Process) Regulations, 2016, which recognizes registration of charge with CERSAI as a valid mode for proving security interest.
3. RoC registration under Section 77 of the Companies Act, 2013, though recommended, is not the sole determinant of a secured charge.

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Key Legal Question

The tribunal had to determine:

• Whether a financial creditor automatically qualifies as a secured financial creditor solely based on its charge being registered with CERSAI, or whether registration of the charge with RoC under Section 77 of the Companies Act is also mandatory.

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NCLAT’s Observations

The NCLAT, comprising Justice Rakesh Kumar Jain (Judicial Member), Justice Mohammad Faiz Alam Khan (Judicial Member), and Mr. Naresh Salecha (Technical Member), made the following observations:

1. Definition of Financial and Secured Creditors:
   • A financial creditor is one to whom a financial debt is owed, including interest.
   • A secured financial creditor is one whose debt is secured by a charge on the assets of the corporate debtor.
2. Priority in Insolvency and Liquidation:
   • Secured creditors enjoy priority over unsecured creditors during CIRP and liquidation.
3. Role of CERSAI:
   • The tribunal clarified that a security interest recorded with CERSAI is valid proof of a secured charge.
   • Non-registration with RoC does not automatically negate the secured status of a creditor if the charge is validly recorded with CERSAI.

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Verdict

The NCLAT allowed Bizloan’s appeal and set aside the NCLT order, ruling that:

• Bizloan should have been treated as a secured financial creditor since its charge was duly registered with CERSAI.
• Registration with RoC under Section 77 of the Companies Act is not the sole determinant of secured status.

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Significance of This Ruling

This judgment provides significant clarity on the interplay between CERSAI registration and RoC registration, especially for financial institutions and creditors.

• It reaffirms that CERSAI registration is sufficient for establishing a valid security interest under the IBC framework.
• The ruling will help creditors avoid unnecessary disputes regarding classification during insolvency or liquidation proceedings.

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FAQs

1. What is CERSAI registration?

CERSAI is a centralized registry that records security interests over properties to prevent fraud and duplication of charges.

2. Is RoC registration mandatory for claiming secured creditor status?

No. As per this NCLAT ruling, CERSAI registration alone is sufficient to establish secured creditor status.

3. What is the difference between secured and unsecured creditors under IBC?

Secured creditors hold a legal charge or interest over the debtor’s assets, giving them priority during insolvency or liquidation, unlike unsecured creditors.

4. Why was Bizloan classified as an unsecured creditor initially?

The NCLT, Mumbai, held that absence of RoC registration made Bizloan unsecured. The NCLAT has now overruled this view.

5. What is the benefit of being a secured creditor?

Secured creditors have a higher claim priority and can recover dues by enforcing their security during liquidation.

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Conclusion

The NCLAT’s ruling in favor of Bizloan Private Limited sets a crucial precedent for creditors relying on CERSAI registration to claim their secured status under IBC. It emphasizes that security interests are not exclusively dependent on RoC registration, and CERSAI records hold sufficient legal validity.

This judgment is likely to simplify the resolution process by avoiding disputes over the classification of creditors, ensuring a smoother and more efficient CIRP and liquidation process.

Published on: 21 July 2025
Author: CS Chhavi Goyal